Structuring a HECM Loan

Shannon Hicks July 20, 2018 4

ePath 100K RM leads

reverse mortgage newsOften overlooked loan structuring is key for HECM borrowers

The following commentary does not represent the official position of Reverse Focus, Inc.

It seems much of our industry’s news cycle, including here, is focused on recent or even anticipated changes to the Home Equity Conversion Mortgage. However there has been little discussion of the importance of structuring a reverse mortgage to meet the goals of the borrower.



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  1. Mary Regan July 23, 2018 at 10:10 am - Reply

    Having worn two hats for the last 10 years, first as a HECM counselor and now as a HECM loan officer it always amazed me during counseling how many people are not advised of how to structure their loan for their benefit. Now, as a loan officer, I cannot completely put away my counselor hat and always listen to my borrowers and help them understand the versatility of this loan and it’s many benefits. I always bring up the option of making payments on the adjustable product even when the loan is used for a purchase. It takes a little more time but it is worth it.

    • The_Cynic July 23, 2018 at 11:36 am - Reply


      Throughout the history of the industry, structure has not been a concern and by the word “structure” I mean something much different than the interviewee.

      A HECM may not be a loan of last resort but neither should it be treated as loan to gain more luxurious living. For many seniors, a HECM is like winning the lottery. After a couple of years, they wonder where their proceeds went. This is true no matter how well structured the payout is since it is subject to change at the will of the borrower.

  2. Melinda Hipp July 25, 2018 at 9:39 am - Reply

    After 13 years of originating Reverse Mortgages, I have yet to have a client take out the loan to live a “luxurious lifestyle”. Not that I have not HEARD of stories of folks (such as a professional poker player taking one out to further advance his craft). However, being in Texas and not in the lap of luxury, I have not had that issue. I agree with Mary that presenting EVERY financial option is the way to go. And then if they DO want to buy a boat, go ahead. And as to Mr. Veale, James don’t make everything sound like our clients can even understand cash flow much less how debt works. Yes there will be clients, when connected to a financial planner, that will want advice from both parties, but the majority of clients truly want OUR help and advice and we all simply need to understand their needs and be able to structure the loan the best way to fit their lifestyles and be sure they have a plan if the Reverse Mortgage funds either run out, or they cannot keep up their responsibilities. If we all had crystal balls………

    • Sharon K Falvey July 26, 2018 at 5:05 am - Reply

      One must first understand what was meant by Lifestyle. There were four buckets mentioned in the interview, lifestyle, longevity, legacy, and liquidity. Wade Pfau, Ph.D., CFA has described these financial goals for retirement in his book “How to use Reverse Mortgages to Secure Your Retirement” as this:

      Lifestyle: .. maximize spending power…

      Longevity: …in such a way that spending can remain consistent and sustainable…

      Legacy: …leaving assets for subsequent generations…

      Liquidity: “maintaining sufficient reserves for unexpected contingencies that have not been earmarked for other purposes.”

      HUD changes have forced us to examine who our client is. We now have the opportunity to get in front of the “loan of last resort” mentality and position our clients to have another tool to utilize in their retirement years. That means that consumers should look to put the Reverse Mortgage in place early in retirement. The whole point is to consult with your clients about their core needs so that you can present options personalized to each client to that relate to these four buckets. Help them think beyond what they believe their needs are today.

      Loan consultants that have mastered this art are growing their business, it’s something to think about.

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